Influence of latest economic sanctions on Russia unclear

Published : 2014-08-03 20:53
Updated : 2014-08-03 20:53

BRUSSELS (AFP) ― No one doubts the latest EU and U.S. economic sanctions on Russia will inflict significant costs, but whether they can force Moscow to reverse course in Ukraine is a completely different question.

The United States has been making life difficult for Cuba for more than 50 years but its communist government has carried on through thick and thin, even surviving the collapse of its most important ally, the Soviet Union.

Similarly with Zimbabwe where veteran President Robert Mugabe continues to thumb his nose at the West, pressing ahead with the very policies his critics most condemn.

But in Iran, hard hit by U.S. sanctions since the 1980s, the picture is more nuanced.

With an oil-dependent economy teetering on the brink and a young population hungry for modernity, Tehran has softened its line in recent years, agreeing finally in 2013 to talks with the major powers on its hotly disputed nuclear program.

How effective economic sanctions are “is one of the key debates over many, many years,” said Ian Lesser, a senior director at the German Marshall Fund.

“It is simply an unsolved, open question.”

Alongside sanctions success-story Iran, Lesser cited the case of South Africa where “it is arguable that they worked to end apartheid over time, but elsewhere it is very, very unclear. All are unique.”

As the Ukraine crisis deepened, and especially after Russia’s annexation of Crimea in March, President Vladimir Putin has presented himself as the guardian of Russian nationalism and claimed the right to intervene in defense of Russian minorities elsewhere if necessary.

Russia’s President Vladimir Putin. (Itar-Tass-Yonhap)

For Putin, the Ukraine crisis is a high-stakes confrontation with the West which must not be lost given the reverses and slights he believes Russia has suffered since the end of the Cold War.

“Investors should be wary of assuming that the economic risks to Russia occasioned by its actions in Ukraine will inevitably lead to Russia pulling back from confrontation,” Adam Slater, a senior economist at Oxford Economics, said in a commentary.

It may seem obvious that “the economically rational thing for the Russian authorities to do in the face of further sanctions is to pull back from Ukraine, (but) this is by no means guaranteed to happen.

“The political calculations being made by Putin may be very different from the approach that might be followed by another leader in another country,” Slater cautioned.

Ukraine has a special place in Russian history, with Kiev the seat of a precursor state to what became the Grand Duchy of Moscow.

Strategically sited to the southeast, Ukraine was the scene of some of the largest Nazi German offensives into Russia during World War II after which it became a Soviet republic, with Crimea serving as the home base for Russia’s Black Sea fleet.

For Russia, ”if its leaders and the public think (Ukraine) is absolutely vital, then it is going to be very hard to move them,“ Lesser said.

Lesser noted that sanctions can also be counterproductive, citing the case of Serbia in the 1990s where dwindling supplies of food and other daily necessities strengthened the government’s position because the population had no one else to turn to for help.

The list of countries hit with sanctions is a long and checkered one, from Syria to North Korea by way of Myanmar and Belarus, to Iraq and Poland of the 1980s who found economic, political, and even cultural and sporting ties severed or curtailed.

In Russia’s case, the European Union, similarly to Washington, is targeting its banking, defence and energy sectors, aiming to make it pay a price over the Ukraine crisis in the hope Moscow will then reverse course.

Konstanty Gebert, Associate Fellow with the European Council on Foreign Relations, said he was sceptical the new sanctions would produce results any time soon.

Europe variously wants Moscow to stop meddling in Ukraine, support a peaceful resolution of the crisis and give up occupied territory such as Crimea, Gebert noted.

From Russia’s perspective, the most that could be expected was that “it might be willing to consider the first, depending on how serious the EU is on the sanctions, but certainly not the second or third,” he said.

The latest measures ”were a major improvement“ on the asset freezes and visa bans imposed previously as ”they can actually bite but (they) won‘t be a disaster for Russia.“

Recalling Western sanctions imposed on Poland’s last communist-era leader, General Wojciech Jaruzelski, Gebert noted how one government official at the time had dismissed the measures with the infamous quip: “The government will always find something to eat!”